Personal Loans and Your IVA, Question by Question
What goes in, what stays out, and what happens to the interest.
Can personal loans be included in an IVA?
Yes. An unsecured personal loan, whether from a bank, a building society or an online lender, can be included in an IVA in the same way as credit cards and other borrowing. Once your IVA is approved, the balance is frozen, the lender is bound by the arrangement, and any qualifying amount left at the end is written off. Personal loans are one of the most common debts people bring into an IVA.
Are all personal loans treated the same?
Most are, as long as they are unsecured. Standard personal loans, debt consolidation loans, car loans that are not secured on the vehicle, and similar all count as unsecured debts and go in together. What matters is whether the loan is tied to an asset. If it is secured, it is treated very differently, which the next question covers.
What about a secured loan?
A secured loan cannot usually be included. If a loan is secured against your home or another asset, the lender has rights over that asset, so the debt is not an ordinary unsecured one and stays outside the IVA. You carry on paying it separately to keep the asset, just as you would a mortgage. Only an unsecured shortfall, if one ever arose, might be brought in.
What happens to the interest?
It stops. Once your IVA is approved, the interest and any charges on the included loans are frozen, so the balance no longer grows. Instead of juggling separate loan repayments, you make one affordable monthly payment that is shared among all your creditors. Freezing the interest is often what makes an unmanageable loan manageable again.
How much of a personal loan is written off?
The same way as your other unsecured debts. A personal loan sits alongside your other creditors, you pay what you can afford over the term, and whatever qualifying balance remains at the end is written off. How much that is depends on your overall affordability across all your debts, not on the loan by itself.
What if my loan has a guarantor?
This matters for them. A guarantor loan is one where someone agreed to pay if you could not. Including your own debt in an IVA does not release the guarantor, so the lender can still pursue them for the balance. If a friend or family member backed your loan, it is important to understand this, and to talk to them, before you go ahead.
Do I have to include all my loans?
Yes. As with every debt in an IVA, you cannot leave a loan out, all your qualifying unsecured loans must be included. You also cannot take on new loans during the arrangement without permission. If money is tight enough that you feel you need to borrow, that is a sign to speak to your supervisor about your budget rather than taking out more credit.
Should I get advice?
Yes. Loans can usually be dealt with in several ways, and an IVA is just one of them. A free, impartial adviser can look at your whole situation and tell you honestly whether an IVA, a Debt Management Plan, a Debt Relief Order or another route would suit you best. It costs nothing and there is no obligation.
